REINVESTED EARNINGS IN THE NATIONAL ACCOUNTS

The paper raises three questions. Firstly, is it warranted that a significant part of primary (property) income is not shown in the national accounts as being distributed to the owners of the assets to which it accrues but ends up as capital gains in the revaluation account? Secondly, why has the SNA chosen not to record reinvested earnings of corporations as flows of property income with the exception of foreign direct investment, and thirdly why the asymmetrical recording of stock investments constituting more than 10 percent of equity capital depending on whether domestic or foreign transactions are concerned? Reinvested earnings on domestic equity investment above 10 percent of a corporation are not recorded as property income in the system. The paper looks at these three questions from the perspective of the analytical uses of national accounts. The consequences for the analysis of income distribution both between nations and within nations are examined.     

INTEGRATED ENVIRONMENTAL AND ECONOMIC ACCOUNTING: FRAMEWORK FOR A SNA SATELLITE SYSTEM

National accounts have provided the most widely used indicators for the assessment of economic performance, trends of economic growth and of the economic counterpart of social welfare. However, two major drawbacks of national accounting have raised doubts about the usefulness of national accounts data for the measurement of long-term sustainable economic growth and socio-economic development. These drawbacks are the neglect of (a) scarcities of natural resources which threaten the sustained productivity of the economy and (b) the degradation of environmental quality from pollution and its effects on human health and welfare. In the present paper, the authors attempt to reflect environmental concerns in an accounting framework which maintains as far as possible SNA concepts and principles. To this end, the accounting framework is used to develop a "SNA Satellite System for Integrated Environmental and Economic Accounting" (SEEA). Environmental costs of economic activities, natural asset accounts and expenditures for environmental protection and enhancement, are presented in flow accounts and balance sheets in a consistent manner, i.e. maintaining the accounting identities of SNA. Such accounting permits the definition and compilation of modified indicators of income and expenditure, product, capital and value added, allowing for the depletion of natural resources, the degradation of environmental quality and social response to these effects. A desk study of a selected country is used to clarify the proposed approaches, to demonstrate their application in future country studies and to illustrate the quantitative effects of the use of modified concepts on the results of analysis.     

The system of national accounts for the new economy: What should change?

The publication of the 1993 System of National Accounts served as a major milestone in creating international standards for compiling a fully integrated set of accounts measuring a nation's production, income, and wealth. While statistical agencies continue to make progress toward full implementation of the 1993 SNA, attention is now turning to perceived deficiencies of the system and areas for possible improvement. This paper discusses several suggestions for possible changes in the national accounts, including inclusion of multifactor productivity measures in the production account, changes to the definition of output for certain financial services, expanded coverage of intangible assets, capitalization of military equipment, inclusion of consumer durable goods in measures of saving, imputation of a rate of return to fixed assets used for nonmarket production, reconsideration of sectoral boundaries, and modification of the definition of capital transfers for capital gains taxes.     

INTERNATIONAL TRANSFERS AND ECONOMIC PERFORMANCE ANALYSIS

This paper examines the appropriate treatment of international transfers in the national accounts. It argues that the appropriate treatment differs, depending upon the use to be made of the accounts. The treatment recommended in the SNA is appropriate for expenditure behavior analysis, with its emphasis on total disposable income on the one hand, and its allocation between consumption and saving on the other. For economic performance analysis, however, the primary focus of interest is the excess, if any, of aggregate resource use over the GNP, i.e., the extent to which the combined level of consumption and investment is sustained out of own production or is dependent on unrequited capital inflow. It is essential for this purpose that the measure of capital inflow include all international transfers regardless of their economic destination.     

COMMODITY BALANCES AND NATIONAL ACCOUNTS: A SAM PERSPECTIVE

This paper is concerned with the treatment of commodity and activity balances in a national accounts context. It makes use of a general method for reducing the size of a social accounting matrix (SAM) by apportioning the elements of one or more accounts to the rest. The national accounts are looked at in terms of their usefulness for policy analysis, not least analysis of the impact of price changes. The SNA convention of separately distinguishing activities and commodities is endorsed. However, in contrast to the SNA, it is argued that for analytic purposes commodity transactions should be recorded at market prices, with a separate account for each of the markets for a given commodity in which a distinct price prevails. The SNA SAM is shown to be a reduced form of the SAM resulting from this recommended treatment of commodity transactions, while a further round of reductions (apportionments) yields SAMs which are familiar from input-output analysis, in which activities and commodities are not separately distinguished. It is argued that no special effort would be required to produce SAMs in which commodity balances are recorded at market prices as recommended here (the necessary data are also required to produce the conventional SNA tableaux), and that all reduced form versions of such SAMs, including the SNA, are inferior as a basis for the analysis of price effects on the structure of production.     

INDUSTRY‐LEVEL PRODUCTIVITY MEASUREMENT AND THE 2008 SYSTEM OF NATIONAL ACCOUNTS

The 2008 System of National Accounts recognizes capital services as the conceptually correct way to measure the input of capital into production. This allows setting up an integrated system of industry‐level and aggregate productivity accounts that are consistent with the 2008 SNA. The paper discusses the new aspects in the 2008 SNA and sets out such an integrated system, based on Jorgenson's aggregate production possibility frontier and gross output‐based industry productivity measures. Recent results for industry productivity measures for the United States complete the picture.     

The relationship between government accounts and national accounts, with special reference to the netherlands

National accounts are a macro-economic accounting system that is compiled on the basis of a globally harmonized accounting standard, that is SNA93/ESA95. To a large extent, the SNA93/ESA95 accounting principles are also suitable for government (micro-)accounting purposes, if only because the accounts drawn up according to this standard are comparable across (types of) units and over time. That facilitates performance monitoring and benchmarking. In addition, the ESA95 guidelines and procedures deal with innovative transactions and accounting, which increases the credibility of the accounts. Finally, accounts for government units are then directly comparable with the macroeconomic accounts, which facilitates the link between forecasts for the national economy and drawing up government budgets. This paper also describes the present conversion of government accounts to national accounts for the government sector in the Netherlands and the plans of the Dutch government to change from a cash-based to an accrual government accounting system.     

MISUSE AND USE OF NATIONAL ACCOUNTS AS A WELFARE INDICATOR: SELECTED ANALYTICAL AND MEASUREMENT ISSUES

Few economic relationships have been as scrutinized as that between SNA measures of national product, investment and consumption, and welfare. The present paper contrasts SNA economic production and welfare to total production and welfare within the Walrasian framework of usefulness and costliness. An evaluation of deductions and additions to the SNA made by Nordhaus-Tobin, Zolotas, Richard and Nancy Ruggles, Kendrick, Eisner and Jorgenson-Fraumeni, in their research on extended product and income accounts and improved indicators of welfare reveals numerous unresolved analytical and measurement issues; and reaffirms the usefulness of the SNA as a fundamental, initial, welfare indicator.     

A SIMPLIFIED INTEGRATED FORM OF SNA AND MPS*

At present two systems of measurement of national product are in practice, one as defined in the UN System of National Accounts (SNA) and the other termed the Material Product System (MPS) or National Balances for the Economy. In the present paper, an expanded system of accounts integrating the national balances within the framework of a simplified SNA has been suggested. The accounts suggested are mainly the two sets of (i) Supply, Disposition and Domestic Production of goods and services and Consumption Expenditure of Budget and Mixed Organisations and the Population, and (ii) Income and Outlay and Capital Formation Accounts. The system is convenient not only for arriving at estimates by either of the two approaches, but is readily manageable. This set of accounts can, without any effort, be put in the form of a matrix leading to its ultimate integration with either the UN System of National Accounts or a modified system of national balances. The system gives not only the integrated system of SNA and national balances, but also a coded list of transactors and transactions within the economy. This coded list can be used as the first set of information for the creation of the economic data bank for the Integrated Statistical Information System.     

Towards a consistent approach for ecosystem accounting

In spite of an increasing interest in environmental economic accounting, there is still very limited experience with the integration of ecosystem services and ecosystem capital in national accounts. This paper identifies four key methodological challenges in developing ecosystem accounts: the definition of ecosystem services in the context of accounting, their allocation to institutional sectors; the treatment of degradation and rehabilitation, and valuing ecosystem services consistent with SNA principles. We analyze the different perspectives taken on these challenges and present a number of proposals to deal with the challenges in developing ecosystem accounts. These proposals comprise several novel aspects, including (i) presenting an accounting approach that recognizes that most ecosystems are strongly influenced by people and that ecosystem services depend on natural processes as well as human ecosystem management; and, (ii) recording ecosystem services as either contributions of a private land owner or as generated by a sector ’Ecosystems’ depending on the type of ecosystem service. We also present a consistent approach for recording degradation, and for applying monetary valuation approaches in the context of accounting.     

Integrated Environmental and Economic Accounting: An Application to the Forest Resources in India

Forests contribute to the economy in several ways. While forests are a source of timber with market values, they also influence local and regional climate, preserve soil cover on site, and in the case of watersheds, protect soil downstream from floods –functions, which are not in the production boundary of SNA. Further, the net value added in forestry sector does not reflect sustainability of forest resources, because it ignores the consumption of natural capital (depletion) that occurs when forests are harvested or converted to other uses. The only costs of depletion considered in the national accounts are the extraction costs and records the potential loss in forest wealth as other changes in assets that have no effect on Gross Domestic Product (GDP). The study tries to incorporate forest resources into the national accounts and adjust the Gross Domestic Product (GDP) for the depletion of forest capital, using the Satellite System of Integrated Environmental and Economic Accounting (SEEA). The value of net accumulation (positive or negative) of forests is calculated and the net Domestic Product is adjusted for the depletion of the forest resources to get Environment adjusted Domestic Product (EDP). The results show that the EDP equals 98.4% of the adjusted net domestic product in 1993–1994. A proper accounting framework would better reflect not only the long term value of the state's natural wealth but also its immediate contribution to the state economy in the current accounts.     

INTEREST AND INFLATION ACCOUNTING

This paper analyses the treatments proposed by Chapter XIX (Annex B) of the 1993 SNA and the manual Inflation Accounting published by the OECD (Peter Hill) as alternatives to the traditional recording of nominal interest. Real interest and interest prime (annex B) are relevant for different purposes. Their amounts are not the same to the extent that actual compensation and full required compensation for inflation differ. The recording of negative real interest is not compatible with the exclusion of holding gains/losses from the SNA current accounts. The accounting treatments in Inflation Accounting (capital transfers, additional lending/borrowing, no nominal holding gains/losses) and Annex B (nominal holding gains/losses, no capital transfers, no new lending/borrowing) are contrasted.     

A REVIEW OF SELECTED ASPECTS OF THE UNITED NATIONS SYSTEM OF NATIONAL ACCOUNTS IN THE LIGHT OF COUNTRIES’ EXPERIENCES*

A review of the United Nations System of National Accounts and its implementation by countries is presently being conducted at the United Nations Statistical Office. This article presents a personal and selective account by the author of the results of that review and its consequences for the present structure of the SNA. Information is included on the level of response by countries for the tables of the SNA national accounts questionnaire. It shows that this response is at present sparce, except for the tables on GDP by end use, cost structure and kind of economic activity. On the more detailed level the feasibility of introducing integrated sector accounts into the system has been examined and different approaches compared. Country practices suggest that one way of facilitating the introduction of such accounts would be to eliminate one essential feature of the dual classification of the SNA, i.e., the distinction between quasi-corporate and other unincorporated enterprises. Other modifications of the SNA structure implied below are the introduction on a limited scale of articulation of transactions, the inclusion of additional aggregate income and balancing items, a reallocation of data between the main accounts and the supporting tables, and a better integration of the SNA matrix with the accounts and tables of the system. A reduction of the present number of independent classifications in the SNA is suggested, based on links between categories of different classifications that are assumed in country responses to the questionnaire. A suggestion is made for a uniform valuation of goods and services and income flows, to replace the present complex valuation guidelines on approximate basic and factor values and producers’ prices.     

Principal Features of Building Social Accounts Matrix and Improving Statistical Database for Eco-countries

With common borders of the population, total area, and GDP （PPP-based） of Economic Cooperation Organization （ECO） member states are estimated as 416 million persons, 7.9 million m2, and US$2.7 trillion respectively （2010 data）. Although heterogeneous in the extent, there is economic development, overall, with serious energy and transport-transit relations among countries that is reflected in growing trade turnover year-by-year. However, there are still rather unused resources and capacity in such areas of cooperation among countries as exchange of energy, transport services, agricultural and industrial goods, use of opportunities for tourism, promoting investment and innovation processes and other areas. Certainly, maximum and optimal use of these resources calls for availability of analytical means capable of accounting for relations both within member states and among them. The implementation of computable general equilibrium （CGE） modeling in each member state would thus be of great significance in resolution of these problems both in terms of accounting for input-output linkages within the countries as well as enabling impact of main trading partners and goods and services among countries. The analysis carried out indicates that there are a number of problems in application of CGE model in most of the member states. As such, input-output tables are not compiled in some countries, while in others despite the fact that these tables are compiled, there are no attempts to build the model, yet in other countries, even if the CGE model is implemented, there are difficulties in taking into account the real results in the face of serious problems related to improving national accounts system database. Summarizing these problems, it is possible to conclude that to ensure the application of a CGE model,there is a great need to work out procedures of compilation of a social accounts matrix （SAM） that lies on the basis of this model, for which the relevant statistics of a member state must be improved     

CONCEPT AND DEFINITION OF INCOME IN THE NATIONAL ACCOUNTS

It is a truism that the national accounts have engendered their own concept of income which is different from other contexts such as business accounting, taxation or welfare analysis. Less known are the principles on which this income concept is based. This article is an attempt to specify such principles, investigating in particular the role of the transaction principle, and to derive an income concept therefrom. The crucial point of the argument is whether or not it is appropriate within the system of the national accounts to assign an income to sectors other than the households. The theory is applied to some practical questions which have been discussed in the process of the revision of the SNA.     

THE DUTCH ECONOMY 1921–39: REVISED MACROECONOMIC DATA FOR THE INTERWAR PERIOD

A set of revised macroeconomic time series for the Netherlands 1921–39 is presented. The series cover the "Consolidated Accounts for the Nation" of the SNA in current prices as well as the national product account and some additional series in prices for the previous year. The new interwar series differ considerably from the data that has been published before. They are also more comprehensive, more detailed, and conceptually consistent with the modern national accounts.     

Introducing a certified economic accountant (CEA) degree or diploma program: Would Nancy and Richard Ruggles approve?

This paper is inspired by the work of Nancy and Richard Ruggles promoting national economic accounting in academic and non-academic areas. They were concerned with both compilation and use of national accounts as well as developmental issues. Now that the subject has matured with the 1993 SNA standards, the compilation, development and understanding of the accounts require special training and experience, but national economic accounting has become a multidisciplinary matter that cannot easily fit into one academic department. Hence we advocate a Certified Economic Accountant (CEA) degree or diploma program to gain enhanced recognition and greater understanding for national economic accountants and their work. The paper includes an annotated list of 50 references, covering the period 1942–2002, that might form a syllabus, and a section outlining the mechanics and problems of organizing such a program.     

PRICES AND PRICE ANALYSIS IN THE FRAMEWORK OF THE NATIONAL ACCOUNTS

The paper discusses the role of prices in the framework of the new System of National Accounts (SNA) in terms of three major uses: (1) deflation, (2) price indicators, and (3) price analysis. Following a brief review of the price and quantity measures required by the new SNA with its emphasis on deflation of commodity flows and input-output accounts, in addition to the more conventional deflation of final demand categories, the paper discusses some of the conceptual, methodological and data problems involved in implementing the various uses of prices in the new SNA. Implementing the use of prices as deflators depends, in part, on the concept of output selected (national versus domestic; gross versus net), and which of six concepts of valuation, ranging from purchasers'value to true factor cost, is used. Some of the difficulties in deflating nonmarket flows (e.g., interplant transfers) and industry value added, based on the double deflation method, are discussed. In concept price deflators, which have shifting weights, cannot be used as price indicators, which should have fixed weights. In practice, this is often disregarded and the deflators are used as price indicators. The paper support the SNA recommendation for the development of price indexes with fixed weights to be used as price indicators, in addition to the implicit price deflators. Research in the United States indicates that differences in weights can result in different price measures for various subperiods, components of demand and sector output. Periodic revisions in weights to provide more current fixed weights for price and quantity indexes in each subperiod may minimize the problem but it introduces a new problem—lack of comparability with the constant price tables in the SNA which have fixed weights for the entire period. The new SNA provides a comprehensive and integrated framework for price analysis including the analysis of the structure of aggregate price changes, the industrial origin of final demand prices, and the impact of price change in one sector of the economy on the rest of the economy. Some major gaps which need to be overcome in order to implement the use of the new SNA for price analysis include the development of industry capital stock estimates, separate estimates of proprietors’income, reconciliation of value added and distribution share estimates, and the development of a wide variety of information to supplement the conventional input-output tables in the SNA. Implementing the various objectives of price measures within the framework of the accounts will require a number of improvements in existing price measures and expanding the scope of coverage. “List” prices should be superseded by “transactions” prices and better techniques and data need to be developed to provide for quality adjustment of prices. Coverage will need to be expanded to include services, freight rates, trade margins, government expenditures, and also fill in gaps for many manufactured products. Finally, where possible, use of unit values as price indexes or deflators, e.g., imports and exports, should be replaced by direct price measures.